What happened

Shares of Acadia Healthcare Company Inc. (NASDAQ:ACHC), a company focused on providing psychiatric and chemical dependency services, dropped 19% as of 12:05 p.m. EST on Friday. The decline appears to be linked to the release of a report from a short-seller.

So what 

Traders are reacting harshly to a short-seller report that was published by an author named Penn Little today.

The crux of the short-seller's argument is that Acadia is engaged in a number of questionable business practices and that its books do not look as good as they appear. What's more, inside ownership of the company has dropped significantly in the last three years, which suggests that those who know the company best are fleeing from a sinking ship.

Businessman with hand over face talking on phone.

Image source: Getty Images.

The report concludes by stating that the company is basically worthless. Traders are fleeing from the stock in response.

Now what

Penn Little's data did show that inside ownership of Acadia's stock has fallen from around 30% in 2015 to less than 3% today. Acadia's stock has been in free fall during that time, so it is a bit troubling to see that insiders have been selling off the stock at worse and worse prices.

It's possible that this short-seller report could be completely wrong in its assessment and that Acadia's stock is a value today. However, I'm not a fan of catching falling knives, so my plan is to steer clear of this business. 

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.